Isranomics

While many are focusing on appreciating dollar, it is this currency that gained 20% against shekel

by | Feb 22, 2023 | Economy | 0 comments

Despite hitting a low in 2022, the euro has made a remarkable recovery. For the first time in 20 years, its value dropped below that of the US dollar. Breaking out of the war, the resultant energy crisis, and the reluctance of the European Central Bank (ECB) to take action against decades high inflation, all led to the euro’s retreat against the main world currencies.

Just over a year ago, in October 2021, the European currency was worth 3.77 shekels. However, in August 2022, it bottomed out at 3.25 shekels.

Expectations were low during the height of the energy crisis as prices soared for both gas and oil. Many experts were sceptical and projected EUR/USD exchange rate dropping to $0.94, with no sign of a recovery. But with energy prices dropping, combined with a relatively warm winter, the economic environment changed, and the euro quickly rebounded in value against the shekel and every other main currency. Within six months, the value of the euro against the shekel has risen by nearly 20%. From the August’s lows, euro risen to 3.89 shekels and is now aiming for the psychological 4 shekel mark. Furthermore, some analysts predict that the euro’s recent upswing will carry on for the foreseeable future.

Euro/Shekel exchange rate (Credit: ycharts.com)

Despite the European Central Bank’s slow response, the region’s financial situation has improved, according to investment bank analysts. Though the euro’s value has recently fallen relative to the US dollar and the British pound, the ECB still has plenty of room to intervene and raise interest rates, which would add wind to the euro’s sails. It is not surprising, then, that the EU’s growth rate has been raised recently from 0.3% to 0.9%, as energy prices remain significantly lower than during their peak in 2022.

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